The Central Bank of Sri Lanka has decided to maintain its Overnight Policy Rate (OPR) at 7.75%, according to a statement following its recent meeting. This rate has remained consistent since May of the previous year.
In the first monetary policy review of 2026, the Monetary Policy Board opted to keep the OPR unchanged after assessing both domestic developments and global economic uncertainties. The Board believes that the current monetary policy stance will help guide inflation towards a target of 5%.
As of December 2025, inflation, as measured by the Colombo Consumer Price Index (CCPI), remained at 2.1%. However, food prices saw an increase in December, attributed to supply chain disruptions from Cyclone Ditwah and heightened demand during the festive season.
Inflation is expected to gradually rise and reach the 5% target by the latter half of 2026. Core inflation, which excludes volatile items such as food, energy, and transport from the CCPI basket, has shown signs of acceleration in recent months. This trend is projected to continue as economic demand strengthens, although inflation expectations remain anchored around the target.
The economy experienced a 5.0% growth during the first nine months of 2025. Despite a slowdown caused by Cyclone Ditwah, early indicators suggest resilience in economic activity. Credit distribution to the private sector by banks and financial institutions expanded notably in late 2025, driven by increased economic activity and vehicle imports. Post-cyclone reconstruction efforts are anticipated to sustain this momentum.
For 2025, the external current account recorded a significant surplus, despite a widening trade deficit. Foreign remittances remained healthy, and Gross Official Reserves increased to USD 6.8 billion by year-end, aided by net foreign exchange purchases by the Central Bank and inflows from multilateral agencies. The Sri Lankan rupee depreciated by 5.6% against the US dollar in 2025 but has remained stable thus far in 2026, supported by a swap facility from the People’s Bank of China.
The Board is prepared to implement necessary policy measures to stabilize inflation around the target while supporting the economy’s growth potential. The next monetary policy review statement is scheduled for release on March 25, 2026.
